INTERNATIONAL LAW: Behind the Timor Sea Treaty dispute

by Peter Westmore

News Weekly, March 26, 2005

Australia and East Timor (Timor Leste) are locked in a conflict over the sea boundary beneath the Timor Sea, which could delay or even prevent the development of the Greater Sunrise gas field, which lies off the coast of East Timor.

For East Timor, the issue is simple. As the poorest country in the region, it desperately needs revenue from the project to provide vital government services to its 900,000 population.

Greater Sunrise is the largest oil and gas field so far discovered in the Timor Sea, with an estimated worth of between US$22 billion and $25 billion, of which the combined government share is approximately US$7 billion. Although the field is wholly claimed by both East Timor and Australia, it is in fact approximately twice as close to East Timor as to Australia.

Yet Australia will receive around 80 per cent of the revenue which will flow from the project.

Agreement

The Greater Sunrise field will not be on line until at least 2009, but its development depends on international agreement on boundaries, or at least agreement on the status of the joint petroleum development area in the Timor Sea.

Both sides have signed the Timor Sea Treaty, under which the oil and gas resources of the disputed area of the Joint Petroleum Development Area (JPDA) are to be exploited jointly, with 90 per cent of the revenue going to East Timor and 10 per cent to Australia.

A second agreement, the Greater Sunrise International Unitisation Agreement (IUA), regulates exploitation of the Greater Sunrise oil and gas field, 20 per cent of which straddles the eastern limit of the disputed territory.

As approximately 80 per cent of the Greater Sunrise deposits lie outside the disputed area of the JPDA, on the seabed under Australian sovereignty, 80 per cent of the revenue is to go to Australia.

Although the issue appears simple, it is actually surprisingly complex.

Australia and Indonesia signed a seabed treaty in 1972 which defined the sea-bed boundary between the two states at the edge of the continental shelf.

Portugal, then the colonial power controlling East Timor, was not a party to the negotiations, and did not agree to it.

After Indonesia occupied East Timor, Australia and Indonesia signed the 1989 Timor Gap Treaty, which drew the boundary between East Timor and Australia at the edge of the Australian continental shelf, which is only 60 km from the coast of East Timor.

Since independence, East Timor has rejected this boundary, instead calling for the boundary to be set mid-way between Australia and East Timor, giving it full possession of the Greater Sunrise gas field, as well as the Laminaria-Corralina and Buffalo oilfields.

If Australia were to agree to East Timor's demand that the boundary be placed at the median point, it would face a similar demand from Indonesia regarding West Timor, and would probably face a similar demand from Papua New Guinea regarding Australian islands in the Torres Strait, which extend right to the coastline of Papua New Guinea.

Professor Gillian Triggs, director of the Institute for Comparative and International Law at the University of Melbourne - who is sympathetic to East Timor's position - has described the current dispute as a "fog of myths".

One of the most persuasive of these, she says, is "the apparently rational argument that the seabed between Australia and East Timor should be based on a median or equidistant line."

Professor Triggs said that where adjoining nations lie on the same continental shelf, the median line usually prevails. However, as a matter of geography, Australia's continental shelf ends at the Timor Trough, a major geological feature, 3,000 metres deep, lying about 60 km from the coast of East Timor.

She noted: "Troughs are common in the Pacific Basin and the Okinawa Trough between China and Japan similarly impedes negotiations for a final boundary. So too does the Aruba Gap between Venezuela and Columbia and the Dominican Republic."

Territorial dispute

The countries in our region take these matters extremely seriously. Indonesia and Malaysia are currently engaged in a nasty territorial dispute over contested islands in the Sulawesi Sea, involving the deployment of fighter jets and warships by both countries.

Once again, the issue is possible oil reserves.

The latest Indonesian-Malaysian stand-off is a continuation of a dispute which dates back over 30 years, and which was referred to the International Court of Justice (ICJ) some years ago. It handed down a judgment in December 2002, awarding two contested islands in the area to Malaysia.

One of the Justices, Judge Oda, commented that in the 1960s, "Any dispute that may have arisen at that time concerned only the delimitation of the continental shelf between the two States, which had become of interest because of submarine oil reserves". (ICJ Press Release 2002/39 bis.)

In the meantime, the founding principle on which negotiations over the Timor Sea should develop is that there should be a more equitable share of the royalties to be derived from the fields, than the 82:18 figure currently.